Corporate Cash Hoarding Is Killing the Middle Class

[xchrom]

http://www.alternet.org/economy/corporate-nest-eggs-are-actually-middle-classs-funeral-pyre



I read a number of finance-industry newsletters. I want to share with you a recent excerpt from one of them. Here it is:

$1,265,836,000,000.

This is the amount of cash that S&P 500 companies (excluding banks and other financial institutions) are currently sitting on. As of the beginning of the third quarter, the largest U.S. companies collectively held $1.27 trillion. That’s about 13.5 percent more than this time last year. …

Where is this cash coming from? Well, borrowing accounts for some of it. But mostly, it’s that companies are simply generating cash faster than they are spending it.

Companies sitting on cash — the financial newsletter thinks that this is great news! Spectacular news! How nice — for them.

Here is more great news for Big Business: Corporations have been largely excused from paying taxes. The Government Accountability Office found earlier this year that the average effective tax rate on U.S. corporations is only 12.6 percent of their income. That’s low enough to make Mitt Romney jealous. Hooray, say the financial newsletters! More spectacular news!

In fact, the corporate income tax has been performing a magical disappearing act for decades. In 1952, corporate income tax revenues totaled 6 percent of GDP. The average during our enormous post-war economic expansion, between 1945 and 1970, was more than four percent of GDP. Since then, in every year, it has been less than three percent. In 1983, Reagan’s tax breaks knocked corporate income tax revenue as a percentage of GDP all the way down to 1 percent. It returned to that pitifully low level in the first year of the Obama administration, and it has remained below 2 percent. No wonder the corporate cash pile keeps growing and growing and growing.

[Doctor_J]

1. Taxes are what civilized countries use to take care of this problem

not this one though

Rec

[laundry_queen]

7. Yep

Time to charge those companies for more for hoarding instead of investing in their companies...

[Brigid]

2. OK, so Alan Grayson sends too many damn fundraising emails.

Still, he nails it here -- as usual.

[Trust Buster]

3. That's a mere reflection of Supply and Demand.........

.....Corporate America sent millions of American jobs to cheap Third World labor markets. Then they used the glut of labor supply in this country, that they created, to suppress domestic wages. In the short run, this behavior led to record profits. In the long run, their greed has essentially destroyed their own domestic market. As a result of stagnant wages over the last 20 years, the average American does not have the disposable income to support business expansion in this country. Our economy is not expanding due to a lack of consumer demand. The wing nuts think more supply (corporate tax cuts, less regulation) is the answer. But anyone who knows anything about business knows that a business will not invest in expansion unless the requisite demand exists to enable an adequate return on investment for that expansion.

[riqster]

4. Well put. Supply-side economics has no data to back it up.

http://bluntandcranky.wordpress.com/2012/07/26/why-supply-side-economics-is-a-sick-joke-the-laffer-curve-is-laffable/

If someone were to tell you that they heard something once someplace, and scribbled a curved line on a napkin, would you risk your family’s safety and security on that quick little offhand doodle? Of course not. But that is exactly what the Voodoo Economics politicians have done to our entire nation.

Supply-Side Economic s (the notion that we should shovel extra money to rich folks in order to create prosperity for all) is a purely theoretical notion, and one with no data or historical basis to support it. This specious doctrine has crashed our economy and resulted in an unprecedented looting of wealth from the American majority: the biggest Reverse-Robin Hood scam ever perpetrated. Somewhere in Hades, the Sheriff of Nottingham is cringing with envy.

The Beltway Banditos have taken this unproven notion and, over the past three decades, behaved as if it were a proven fact. It is not a fact, and never was. It was nothing more than a scribble on a mouth wipe, based upon a few cherry-picked quotes from historical Middle Eastern and European scholars. It had never been tried in isolation and had no long-term track record of success (such success as was attributed in the past has been questioned, to put it mildly). Now that is has been attempted, the idea that cutting taxes for rich folk will lead to overall economic gains has been proven NOT to work.

On a purely personal level, Mr. Blunt and Cranky loves tax cuts. But he is fully aware that from the 40’s through the early 70’s, our nation’s economic and tax policies fueled its most productive expansion ever, in terms of infrastructure, personal liberty, and overall economic and social prosperity. Said expansion started to wane as the supply-siders took over, slowed further, and is deader than a doorknob at present. Hell, we are sliding backwards, watching the achievements of the last century crumble around our ears.

This writer heard Mr. Laffer on the news this morning: in response to criticism, he stated that economists who disagreed with him “spent too much time looking at data”. He also said that data was good, but you had to “interpret” it. Put another way, the fool lives in a dream world, an ivory tower, a think tank; somewhere NOT connected with reality. If the data says your idea is not working, then anyone who has spent any time on Planet Reality will reexamine their idea. But not Mr. Laffer and his mindless Supply-Side Lemming Brigade.

If anybody could provide a real-world example in which this laughable notion had actually worked, maybe we could give it more time. But no one has provided such an example, because Supply Side has never worked for more than a few years. Not once. Not ever. Not in recorded history. It is a pipe dream that has become dogma, and hard though it may be, it is time to stop huffing on the Laffer pipe, expel the Laffing Gas, and return to the common-sense economic policies that have been proven to work throughout history.

[Enthusiast]

6. +1 an entire shit load!

[laundry_queen]

8. It's been disproven time and time again

My econ textbook even said it was no longer relevant because economists had debunked it. Yet people can't let it go. Like a religion, but one that has proven to be wrong. Lafferites sit there with their fingers in their ears yelling "lalalalalala I can't hear you" because that is their mentality.

[Enthusiast]

5. +1 a whole bunch!

[RB TexLa]

9. No one is going to spend cash right now. My personal cash holdings have increased

steadily since 2008. And just as it is great for companies who are able to increase cash reserves it is great for me. Should I be punished as well for not spending cash? This sounds greedy from the other side of it. "You have money, you spend that money so we can have! We want and we want now!"

[riqster]

10. I am doing the opposite. Putting the cash into accelerated mortgage payoff, durable goods, and

...other long-term non-cash wealth.

YMMV, of course.

[socialist_n_TN]

11. Do you pay taxes of greater than 12.5% on that cash?......

Personal hording of after tax income if you pay personal tax rates is personal business. Paying (or not paying) business tax rates on a BUNCH of money and NOT reinvesting at least some of it in the economy like the corporate sector is doing affects ALL of us. Unless you think that businesses have no responsibility to the overall society and economy.

If you do, that's cool. That's capitalism after all. The only motive is profit. Of course, that leaves the rest of us with a problem. In a Monopoly when one player hoards all of the cash and property, you have to start the game over by "confiscating" all the money and property and redistributing it.

If the rest of us don't have any money left over because businesses have it all, we'll have to redistribute it somehow in order to start the game over. That's OK too, but I certainly get tired of real life Monopoly every third generation or so. Marx showed another more equitable way.

[RB TexLa]

12. After paying the taxes for earning it, I pay no taxes for holding cash. No one does or should.

[reformist2]

13. I don't want the corporations to spend it. I want the government to take it and redistribute it.

[RB TexLa]

14. Mine too? There's no way I'm spending mine.

[reformist2]

15. I'd be in favor of a wealth tax for those with net worth of more than say $100K.

[name not needed]

17. Wow.

God forbid someone save for their retirement.

[RB TexLa]

18. Or payoff their mortgage

[socialist_n_TN]

19. Well with enough money into government programs like Social Security.......

and expanded Medicare to pay the elderly a living wage after their working life is over, why would you need to save so much for retirement?

[colsohlibgal]

16. The Big Con

The ultra wealthy aren't so much job creating with all that excess money, they tend to stash that cash offshore to avoid even being taxed on it. That's what you're supporting all you middle class conservatives, how patriotic is that?

[Taitertots]

20. Hoarding cash is why monetary policy has been ineffective, and fiscal expansion is the only cure

for our economic problems.

Higher corporate/top bracket taxes and higher government spending is the only way to reduce the output gap.

[Initech]

21. $1.27 *TRILLION*. That's going to waste. This is fucking criminal!!!

Why oh why don't we classify wealth addiction as a mental disorder? These CEOs are completely addicted to their obscene wealth. And you know what? We elect a Jeb Bush, Rand Paul, or Chris Christie president, expect something a million times worse than what happened in 2008. Because all a republican administration will do is just keep feeding the wealth addicted. Yes. Expect worse than 2008.